Highway Economics and Finance - part 3( Economic analysis)

Hi,
This is the 3rd part of our topic 'Highway Economics and Finance', in first part we talked about the need of highway economics and the some of the road user benefits with the vehicle operation cost. In second part we talked about the Highway costs which includes the capital cost and the maintenance cost. If you want to go again through the previous articles please visit the links below:

Highway Economics and Finance -part 1.

Highway Economics and Finance - Part 2 (Highway Costs)

Economic analysis of a highway improvement aims at determining the monetary benefit due to the additional expenditure. The analysis also helps to decide the most economical proposal among various alternatives.

• Methods of Analysis:

Methods of analysis of the economic justification of a highway project has same principle, that benefits must qualify for the expenditure on the improvement by comparing them with some appropriate method.

There are various methods of analysis but the most common are as given below:

• Annual Cost Method:

In this method the annual cost of each component of the highway improvement project is calculated by multiplying the capital value with some appropriate capital recovery which is calculated for the given life span.  Annual cost may be found by the following relation:
Cr = P[ {i(1+ i)^n}/{(1+ i)^n - 1}] = P (CRF)

Total annual cost of an improvement is sum of all annual costs of capital recovery(Cr) plus annual maintenance and road user costs. 

• Rate of return Method:

There are number of variations for the determination of rate of return of a highway improvement. In the rate of return method, the interest rate at which two alternative solutions have equal annual cost is found. If the rate of return of all projects are known, the priority for the improvement could be established. 

Road Research Laboratory(London) has recommended a simplified procedure of rate of return method. The percentage rate of return R is given by

R = [(O+A-M)/P ]*100

Where, O = Savings in annual road user costs

    A = Annual savings in accident costs

    M = Additional maintenance cost per anum

    P = Capital cost of improvement.

• Benefit Cost Ratio Method

The principle of this method is to assess the merit of a particular scheme by comparing the annual benefits with the increase in annual cost.

Benefit cost ratio   = Annual benefits from improvement / Annual cost of the improvement

                                   = (R-R1)/(H1-H)

Where, R = Total annual road user cost for existing highway

               R1 = Total annual road user cost for proposed highway improvement

              H = Total annual cost of existing road

               H1 = Total annual cost of proposed highway improvement.

The benefit-cost ratios are determined between alternate proposals and those plans which are not attractive are discarded. Then the benefit cost ratios for various increments of added investment are computed to arrive at the best proposal. In order to justify the investment, the ratio should be greater than 1.0. 

• Highway Finance:

Basic principle in highway financing is that the funds spent on highways are recovered from the road users. The recovery may be both direct and indirect.

Two general methods of highway financing are:

1. Pay us as you go method
2. Credit financing method

In pay as you go method, the payment for the highway improvements, maintenance and operation is made from the central revenue. In credit financing method, the payment for highway improvement is made from borrowed money and this amount and the interests are re-paid from the future income.

• Distribution of the highway cost:

The distribution of highway cost among the Government, road user and other has been a disputed task in several countries. Many economists are of the view that the financial responsibility for roads should be assigned only among the beneficiaries on the basis of the benefits each one receives. 

There are several theories suggesting the method of distribution of highway taxes between passenger cars and other commercial vehicles like the trucks. However in India the annual revenue from transport has been much higher than the expenditure on road development and maintenance. Therefore there is no problem of distributing the highway cost among other agency. Also the taxation on vehicles is being considered separately by the states and there seems to be no theory followed for the distribution of taxes between various classes of vehicles.

• Sources of Revenue:

The various sources from which the funds necessary for highway development and maintenance may be made available, are listed below:

1. Taxes on motor fuel and lubrication
2. Duties and taxes on new vehicles and spare parts including tyres
3. Vehicles registration tax
4. Special taxes on commercial vehicles
5. Other road user taxes
6. Property taxes
7. Toll taxes
8. Other funds set apart for highways,

• Highway financing in India:

The responsibility of financing different roads lies with the Central Government, State Governments and local bodies including Corporations, Municipalities, District boards and Panchayats.

Taxes levied by Central Govt. for Highway financing are:

• Duties and taxes on motor fuel
• Excise duty on vehicles and spare parts, tyre etc.
• Excise duty on oils, grease, etc.

Taxes levied by the State Govt. include:

• Registration fees for vehicles and road tax
• Permits for transport vehicles
• Passenger tax on buses
• Sales tax on vehicle parts tyres etc.
• Fees on driving licenses.

Taxes levied by the local bodies are mainly the toll taxes.

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Highway Economics and Finance - Part 2 (Highway Costs)

Hi,
In first part of this topic we have discussed about the various highway user benefits and highway operation costs. Being continuation of the same topic in this 2nd part we are going to discuss the highway costs.

• Highway Costs

In general the total highway cost for road user benefit analysis is the sum of the capital costs expressed on an annual basis and the annual cost of maintenance.  This total cost for highway improvement is obtained from the estimate prepared from the preliminary plans.
The total cost of highway improvement project is calculated from the following components:

1. Right of Way
2. Grading, drainage and minor structure
3. Major Structures like bridges
4. Pavement and appurtenances
5. Annual cost of maintenance and operation

• Annual Highway cost:

The annual cost is considered in the economic analysis of highway projects. Instead of considering the overall cost of a project the annual repayment of a capital loan plus the interest over a specified period of time of the annual capital cost is considered in the analysis.

Cr = P[ {i(1+ i)^n}/{(1+ i)^n - 1}] = P (CRF)

Here, Cr = Receipt in a uniform series for n periods to cover P at a rate of interest i

P = First cost of improvement of an element of a highway.

i = rate of interest per unit period

n = period of time in number of interest periods

CRF = Capital Recovery Factor 

In case Sv or salvage value is also there, then the above equation can be re-arranged as 

Cr = (C-Vs)[ {i(1+ i)^n}/{(1+ i)^n - 1}]  + i.Vs = P (CRF) + i.Vs

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REFERENCE: Highway Engineering by S.K.Khanna and C.E.G. Justo

Highway Economics and Finance -part 1.

Hi,

• Introduction:

Improvements in the highways results in various benefits to the road users such as:

1. Reduction in the vehicle operation cost
2. Reduction in the travel time and resultant benefits in terms of time cost of vehicles and passengers.
3. Reduction in the accidents rates.
4. Ease of driving and improved level of services.
5. increased comfort to the passengers.

This indicates that level of improvement and service of a road may be assessed from the benefits to the road users.

The improvements in road net work also benefits the land owner by providing better access and consequently enhancing the land value.The cost of the land, materials, construction work and of other facilities should be worked out. 

In terms of the economic justification for the improvements, the cost reductions to the highway users and other beneficiaries of the improvements during the estimated period should be higher than the investments made for the improvement.

Therefore there is a strong need of analysis in planning and design of highway to indicate justification of the expenditure required, particularly when various alternatives are being compared.

Any new proposal for highway improvement or development should be justified in terms of the cost incurred and benefits derived.

Economic analysis is the only means for finalizing the proposal and convincing the public about the need for certain investments.

The government or any other agency finances highway developments. The funds for these are generally recovered from the road users in the form of the direct and indirect taxation.  Highway finance deals with various methods of raising and or providing money for the highway projects.

• Highway users benefits:

Road user benefits are the advantages, privileges of savings that accrue to drivers or owners through the use of one highway facility as compared with the use of another. Benefits are measured in terms of the decrease in road user costs and the increase in the road user services.  The road users services are the advantages or the privileges accruing to the vehicle driver or owner through features of the safety, comfort, convenience etc.  In some cases these can be calculated in rupees per vehicle- kilometer. 

A reduction in the transportation cost as a result of highway improvements, would result in the reduction in the cost of almost every commodity which is transported from place to place before being delivered to the consumer. 

The various benefits due to the highway improvement may be classified into two categories:

1. Quantifiable or tangible benefits in terms of market values and
2. Non-quantifiable or intangible benefits.

• Quantifiable Benefits:

Various benefits which can be quantified include benefits to road users such as reduction in the vehicle operation cost, time cost and accident cost. Also it enhances the land value. These are beifly explained below:

1. Saving in vehicle operation cost is due to the reduction in the fuel and oil consumption and reduction in wear and tear of Tyre and other maintenance costs. A road with sharp curves and steep grades require frequent speed changes;presence of intersections require stopping idling and accelerating; vehicle operation on road stretches with high traffic volume or congestion necessitate speed changes and stopping and increased travel time; all these factors result in an increase in every component of vehicle operation cost. Un-even pavement surface condition with ruts, pot holes, undulations, waves and corrugations increases the vehicle operation cost due to increase in fuel consumption, tyre wear and the general maintenance cost of the vehicle. 
2. Saving in travel time is of direct consequence to commercial vehicles due to possible increase in their trip length and earning per unit time. Benefits due to saving in travel time may be assigned in terms of time cost of vehicles.
3. Value may also be assigned for the saving in travel time of passengers. A part of the time saved by the passengers or commuters may be used  for some useful purpose and a value can be assigned for the saving in the travel time.
4. The reduction in the accident rate due to improvements in the highway facilities causes considerable benefits to the road users and others. The component of the accident costs may include cost of damages to vehicles and other properties, cost for investigations, legal proceedings etc.
5. The benefits to other than road users include the enhancement in land value, increase in the employment opportunities and related economic uplift.

• Non- Quantifiable Benefits:

The non- quantifiable benefits due to improvements in highway facilities include reduction in fatigue and discomfort during travel, increase in comfort and conveniences and improvement in general amenities, social and educational aspects, development of recreational and medical services, improved mobility of essential services and defense forces, aesthetic values, etc. Yet another important intangible road user benefit is the reduced suffering and pain of those involved in highway accidents.

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REFERENCES:  Highway Engineering by S.K.Khanna and C.E.G.Justo

Equipment Used for Bituminous Pavement Construction

Hi,
The main list of the equipment that we need for the construction of the bitumen pavements are:

1. Boiler
2. Sprayer/Distributor 
3. Hot Mix Plants
4. Cold Mix Plants
5. Truck/Dumper
6. Mechanical Pavers/ Finishers
7. Rollers

• Boilers: Boilers are used to soften the bitumen by heating it to certain temperature for its easy application.
• Sprayer/Distributor: Sprayers are required for spreading/distributing the bitumen on the pavement.  If the bitumen is applied with pressure, they are known as pressure distributors.
• Hot Mix Plants: Hot mix plants are required for mixing the aggregates, bitumen and any other required material to prepare the hot mix of the asphalt concrete. Aggregates are bitumen are needed to be heated up to a temperature of 150 to 200 degrees Celsius. 
• Cold Mix Plants: Cold mix plants are required for mixing up the emulsion and the aggregates and so the main difference between the hot mix plants and cold mix plants is that we don't have to heat up the aggregates before mixing. Cold mixes are preferred in the cold regions because emulsions are applicable at low temperatures also.
• Truck/Dumper: They are used to haul the mix to the place of its application and dump it on the paver or finisher.
• Mechanical Pavers/Finishers: Mechanical paver are used to apply the asphalt concrete on the pavement and to partially smooth or compact it. 
• Rollers: Rollers are effectively used to compact the bituminous concrete. For this purpose we use either smooth wheeled rollers or pneumatic rollers.

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Construction Steps for Cement Concrete Pavement

Hi,
Concrete pavements are rigid pavements having very high flexural strength as compared to flexible pavements.





 Concrete pavements can be constructed using two different methods:

1. Alternate Bay method
2. Continuous bay method

• In alternate bay method, concrete pavement slab are laid on whole width of pavement in alternate bays.
• In continuous bay method, concrete pavement slabs are laid continuously only on one bay and another bay is open for the traffic. 

Generally the second method of continuous bay, is preferred over alternate bay method because, traffic movement is allowed while it is restricted in the first. Also, the alternate empty spaces invite the rainwater collection and create inconvenience to the construction work.

Various steps for the construction of concrete pavements:

1. Preparation of Sub-grade and Sub-base
2. Placing of forms
3. Batching of material and Mixing
4. Transporting and Placing of Concrete
5. Compaction and Finishing
6. Floating and Straight Edging
7. Belting, Brooming and Edging
8. Curing of Cement concrete

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Road user Characteristics (Traffic Characteristics)

Hi,

According to S.K.Khanna and S.E.G.Justo from book Highway Engineering, Traffic Engineering is the branch of engineering which deals with the improvement of the traffic performance of road networks and terminals.
 For achieving that we have to perform systematic traffic studies, analysis and then its engineering application.

First of the most important scientific study is the study of the traffic characteristics. Traffic can be classified into two classes:

1. Road Users.
2. Vehicular traffic.

In this post I will discuss the road user characteristics that effect the traffic performance.

• Road user characteristics

Human beings performing different roles in the traffic are most important elements of the traffic and so we have to study their characteristics and behavior. Various roles of human are such as driver, pedestrians, cyclists etc. The physical, mental and emotional characteristics of human beings affect their ability to operate motor vehicle safely or to service as a pedestrian. Hence it is important for a traffic engineer to study the characteristics and limitations of the road users.

The various factors which affect road user characteristics may broadly be classified under four heads:

1. Physical
2. Mental
3. Psychological
4. Environmental

• Physical characteristics: The permanent physical characteristics of the driver are vision, hearing, strength and the general reaction to the traffic situations. 

1. Vision include the acuity of vision, peripheral vision and eye movement; glare vision, glare recovery and depth judgement.  Field of accurate, clear vision is about a 3 degrees cone however the vision is fairly satisfactory up to 10 degrees in general and 20 degrees in horizontal plane.In vertical plane the vision may be limited to 2/3 of that in horizontal plane.
2. Hearing is helpful for drivers but of more important for the pedestrians and cyclists. 



Road users (Google images)

3. Strength is not an important factor in general , lack of strength may make parking maneuvers difficult, particularly for heavy vehicles.

• Mental Characteristics:  Knowledge, skill, intelligence, experience and literacy can affect the road user characteristics. Knowledge of vehicle characteristics, traffic behavior, driving practice, rules of roads and psychology of road users will be quite useful for safe traffic operations. 
• Psychological factors: These effect reaction to traffic situations of road users to a great extent. Attentiveness, anger, fear, anxiety, phobias, superstition, and impatience may effect the traffic performance to great extent. 
• Environment factors: The various environmental conditions affecting the behavior of road user are traffic stream characteristics, facilities to the traffic, atmospheric conditions and locality. The traffic stream may consist of mixed traffic or heavy traffic whereas facilities to overtake to the faster vehicles may be limited. The behavior of the driver varies from one traffic stream to another. 

Similarly the facilities of the traffic separators, multi-lanes etc will effect the performance. Surrounding environment effect the performance of the traffic because one will get slower at the market places and will be faster at the open places. 

Length of Summit Curves (Vertical curve)

Hi,
 Today, I am going to put here the details and engineering behind the length of the Summit Curves required for the vertical alignment of the highways.

• Design criteria for the length of Summit Curves:      Summit curves are the vertical curves having convexity upwards. These curves are introduced for the driving comfort and aesthetic purposes. In summit curves we do not need any transition curves because centrifugal acceleration is not acting laterally outward or inward but, its acting upward. 

So, rate of introduction of providing the superelevation is not the criteria. 
If we provide the circular curve without the transition curve and since centrifugal force is upward, driver will not face the sudden jerk.  The main criteria for the design of the length of the summit curves is the sight distance.

Length of the road is governed by the stopping sight distance and the overtaking sight distance.

• On the basis of the Stopping sight distance(SSD): Suppose length of the transition curve is given as Ls and SSD is denoted by S. Stopping sight distance criteria has two cases:

1. L> S - When length of the curve is less than the stopping sight distance.
2. L<S - When length of the curve is more than the stopping sight distance.

For both the cases IS has given the empirical formulas and you have to check both of them

• L>S :  

In this case check this formula    L=   (NS^2)/ [ (2H)^(1/2) + (2h)^(1/2)]
Here, 
N = Change in grade
S = Stopping sight distance
H = Height of the eye of the driver, taken as 1.2 m
h = Height of the object, taken as 0.15 m.
 putting these values    L =  (NS^2)/ 4.4

• L<S : 

In this case check this formula   L = 2S - [ (2H)^(1/2) + (2h)^(1/2)] / N

Here, 

all terms denote the same as above so,

  L = 2S -4.4/N.

• On the basis of overtaking sight distance(OSD):

For this criteria use the same formulas given above for the SSD but, use the object height as that of the eye level of driver means, take H= 1.2 m and h= 1.2 m also.

• L> S:      then,    L=   (NS^2)/ [ (2H)^(1/2) + (2H)^(1/2)]  = NS^2/ 9.6
• L<S:     then,   L = 2S - [ (2H)^(1/2) + (2h)^(1/2)] / N   = 2S - 9.6/N

you have to use trial method to check both the cases.

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